Economy / Public Sector - Evolution, Reforms and Performance / Use of Disinvestment Proceeds
Use of Disinvestment Proceeds
The funds generated from disinvestment are deposited into the National Investment Fund (NIF) in the Public Account, established in 2005. The NIF is utilized for various purposes, including:
- Subscribing to CPSE Shares:
- Ensures that the government's ownership in CPSEs remains above 51% by subscribing to shares issued on rights basis.
- Preferential Allotment:
- Prevents the dilution of government shareholding below 51% by participating in preferential allotments of CPSE shares.
- Recapitalization:
- Infuses capital into public sector banks and insurance companies to meet regulatory norms.
- Investment in Financial Institutions:
- Capital infusion in Regional Rural Banks (RRBs), India Infrastructure Finance Company Ltd. (IIFCL), National Bank for Agriculture and Rural Development (NABARD), and Export-Import Bank (Exim Bank).
- Equity Infusion in Metro Projects:
- Provides equity for various metro projects.
- Investment in Specific Companies:
- Investment in Bharatiya Nabhikiya Vidyut Nigam Limited and Uranium Corporation of India Ltd.
- Railway Capital Expenditure:
- Investment in Indian Railways towards capital expenditure.
Department of Investment and Public Asset Management (DIPAM):
The Department of Disinvestment, established in 1999, underwent changes and was upgraded to the Ministry of Disinvestment in 2001. Subsequently, in 2004, it became a department once again under the Ministry of Finance. In 2016, the department was renamed the Department of Investment and Public Asset Management (DIPAM). DIPAM's key functions include:
- Management of Central Government Investments:
- Handles all matters related to the management of the central government's investments in equity, including disinvestment of equity in Central Public Sector Enterprises (CPSEs).
- Decision-Making:
- Makes decisions on recommendations from administrative ministries, NITI Aayog, etc., for disinvestment, including strategic disinvestment.
- CPSE-related Decisions:
- Deals with decisions on CPSEs for government investment in equity, such as capital restructuring, bonus, dividends, disinvestment of government equity, and other related issues.
- Provides advice to the government on financial restructuring of CPSEs and attracting investment in these enterprises through the capital market.
